The U.S. Small Business Administration released a one-page form that aims to simplify the application process to forgive Paycheck Protection Program loans, together with revised and updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding to small businesses that needed loans. The funds were used to reduce the economic burden of the coronavirus epidemic. The law requires that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This is to facilitate the application for forgiveness. It also included conditions to encourage banks in the community to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the one-page form for PPP loan forgiveness within 24 days of the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Apple Student Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are qualified to be forgiven. This is when the loan is disbursed within an 8– to 24-week period.
- Employee and compensation levels are maintained
- The proceeds of the loan can be used to pay the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week time period after loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of profits are spent on payroll costs
- How to apply for loan forgiveness , and when
After all loan’s proceeds have been used the borrower is eligible to be granted forgiveness. The borrower can request forgiveness any time up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 years of the end of the period covered and the loan is not renewed, PPP loans are no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.